It has been claimed, in the noisy battle of competing claims sparked by former CAG official R P Singh’s interview to The Indian Express, that Parliament’s Public Accounts Committee (PAC) kept a reasonable distance from the national auditor as it audited the allotment of 2G spectrum in 2010.

'Where I said "you told the paper" should have been phrased “you suggested to the paper that Joshi sought to influence the CAG report".'

2G report not mine, was told to sign it: Babu behind CAG audit

Joshi formula among 3 CAG used to estimate 2G loss

The trail of CAG’s internal documents linked to the audit, however, shows the two institutions interacted closely in the months before the auditor submitted its report. PAC chairman Murli Manohar Joshi contacted CAG official R B Sinha on at least two occasions, and the PAC secretariat sought some ‘talking points’ for discussion in the committee meeting.

A file noting by CAG official Shubha Kumar shows the CAG initially intended to submit the report in the monsoon session of Parliament in 2010. The PAC chief seemed to be aware of this plan, and had hoped to time the PAC’s report accordingly.

In an interview that formed the basis of the report published in The Indian Express on November 23, former D-G, Post and Telecommunication R P Singh — the man behind the CAG’s 2G report — said that CAG officials visited the PAC chairman at his residence to assist him in preparing the PAC’s report.

Asked if there was an attempt by the PAC chairman to influence the outcome of the CAG’s 2G report, Singh said “it appears” from a note prepared by R B Sinha, D-G at CAG headquarters, that there were “some telephone calls by the PAC chairman to access the 2G report which was under preparation”.

THE DOCUMENT TRAIL

On July 14, 2010, CAG Vinod Rai asked D-G (Report Central) Sinha to convey to Joshi that he should get in touch with Rai. This followed after Joshi made inquiries on two successive days about the 2G audit, according to Sinha’s internal note.

“He (Joshi) once again desired to know the audit findings arising out of our audit of the records of the Ministry of Finance, DoT etc related to the issue of licences and allocation of 2G spectrum,” Sinha told Rai in the note on July 14.

In response, Rai wrote on the same note: “As for the rest no further action need be taken till the (PAC) chairman speaks to me.”

A day earlier, on July 13, 2010, Joshi had allegedly spoken to Sinha and said, according to documents: “If probe is further delayed, the executive would get the time to cover up the issues.”

“He (Joshi) further stated that in view of the tremendous interest, heightened anxieties and pressure from all concerned including media, it would be appropriate for the PAC also to submit its report soon after the CAG report is submitted to the President during the monsoon season (session),” Sinha said, referring to his mobile phone conversation with Joshi on July 13.

The BJP-led opposition had stalled Parliament over the 2G issue in May 2010. Sinha had been tasked with the 2G audit after it was taken away from R P Singh.

Earlier, in June that year, Sinha had written a letter to the PAC secretariat in response to a telephone call from the secretariat requesting a set of talking points related to the 2G spectrum issue to be sent to the PAC. “This office has not yet finalised its report on the subject stated above and hence is not in position to send the MIP (memorandum of important points) on the topic to the PAC secretariat,” Sinha had responded on June 17, 2010, following discussions on the request within the CAG.

A note that documented the discussions was more categorical. “This office cannot send a MIP to the PAC sectt. Unless our audit is complete and the report is submitted to the President and laid on the floor of the house,” the note, dated June 12, 2010, said.

At the time Joshi was in touch with Sinha, the draft audit report was yet to be sent to the Department of Telecom and finance ministry for their comments, which is the first phase of finalising audit findings.

Top CAG officials, documents show, did intend to table the report in Parliament during the monsoon session in 2010.

“The report is unlikely to go in monsoon session as intended... quality could not be compromised and being a sensitive report, all aspects require thorough examination,” says a July 19 file noting by Shubha Kumar, principal director at the CAG headquarters.

On the same day, Kumar sent the finalised draft report to R P Singh with a direction: “It is requested that the revised report as vetted by your report section may be issued to the Ministry of Communications and IT and the Ministry of Finance, allowing two weeks time to them for confirmation of facts and figures.”

THE PROCEDURE

The CAG normally gives at least 4-6 weeks to a ministry to reply to its audit findings. The draft report sent by Kumar from CAG headquarters was received at Singh’s office at 6.30 pm on the same day, according to records with the office of the D-G of audits (post and telecommunication). Singh signed the documents and forwarded them to the DoT and finance ministry the same evening, even though he was not linked to the finance ministry audit.

Singh, in his interview to The Indian Express, alleged that the audit had earlier been taken away from him and conducted by CAG headquarters and that he had merely been asked to sign and approve it. The CAG has denied his allegations.

A May 26, 2010 note from Sinha to Singh, however, said the CAG headquarters would “compile” the final audit. “CAG has also advised to make available all the findings, records and such other data available in the course of such audit to headquarter office. Headquarter office would compile the final audit findings,” the note said.

Singh has also said that he did not agree with the CAG’s methods of estimating the loss. A May 31, 2010 letter he wrote to CAG headquarters echoes this. The letter was attached to his draft audit report. In the letter, Singh said he had calculated presumptive losses using two methods. The first was based on the offer by S Tel Pvt Ltd to the Prime Minister for a pan-India licence. But “this is not included in the draft report because the operator withdrew their offer in Delhi High Court”, Singh said in the letter.

The second method compared the price at which 3G spectrum was auctioned to the amount earned from the 2G sale. Singh said he objected to this method as “charging for 2G spectrum for rollout was never recommended by TRAI or the government has never contemplated any charges for the spectrum other than entry fee”.

THE CALCULATION

A third formula that was also eventually used by the CAG to estimate the presumptive loss was suggested by Joshi during a PAC meeting on June 30. (As reported in The Indian Express on November 24.)

This formula was based on the equity infusion through FDI in two companies, Swan and Unitech, that had won 2G licences in 2008. This was extrapolated to arrive at a loss figure of Rs 57,666 crore and Rs 69,626 crore respectively.

The audit team had objected to this formula, according to an internal note dated July 8, 2010. “As desired by PD (RC) a para on loss of potential revenue on issue of licences linking the prices to the FDI attracted by UAS licence is placed opposite for perusal. (In) this connection it is submitted that we are not on strong grounds in the argument made. However, since Hqrs has instructed for a draft we may forward it along with our comments,” it had said.

But the peer review which discussed the objections by R P Singh and others decided that “the calculations of loss as made by DG (P&T) were discussed and general view was that it should be retained if we have documents to sustain it and may be a range can be given rather than a figure”, according to a July 12 note by Shubha Kumar.

On the issue of using equity infusion as a basis to calculate loss, the DG (P&T)’s office led by R P Singh had pointed out that investments by foreign companies “did not transgress the UASL guidelines” and the finance ministry has concurred that “it is a case of dilution of equity and not sale of equity of promoters. Hence it will be difficult to establish a tenable link between the value of UASL and the net worth of foreign investments the licencees attracted”.